Leadership Changes at Uber: What Have We Learned?

Recent leadership changes at Uber have been big headlines. In this article I'd like to share some perspective on the transitions and what they tell us about the role of business in society.

In only eight years, Uber has been through a lot. The company reached nearly $70 billion in valuation, it disrupted the taxi industry, changed the way we travel, and changed the way we think about work. And along the way it experienced lots of public challenges.

We witnessed the #deleteuber boycott, a public argument between the CEO and a driver, lawsuits about driverless car technology, discussions about the need for gig worker benefits, and allegations of sexual harassment.

Most recently, CEO and Founder Travis Kalanick stepped down and two board members resigned (David Bonderman and Bill Gurley), bringing the topic of leadership and governance to a head. 

What can we learn from this?

While these leadership changes make for good press, they are less surprising than one may think -- and they represent an opportunity for Uber to change, taking on an even more important role than ever before.

First point: CEO transitions are not unusual in high-growth companies.

It's not unusual for founder CEOs to step aside. Bersin by Deloitte research on CEO succession and leadership (which we have been doing for nearly 20 years) shows that it is quite common for companies to replace their CEO. Research shows that the median CEO tenure is only 6 years, (Kalanick has been CEO for 8) and my experience with high-tech companies shows that CEOs are often replaced as the company reaches scale.

Harvard Business Review academics have studied this topic and found that CEOs with too long a tenure can actually hurt business performance. I personally witnessed the replacement of John Akers with Lou Gerstner in the 1980s, the replacement of our founders at Sybase in the early 2000s, and of course CEO transitions at Cisco, Twitter, Yahoo, and many other tech companies. Such transitions are often healthy because they represent a recognition that the company is ready for a new phase.

Here's a story you may find interesting. The Senior VP of HR at a very successful tech company told me their experience showed that there were essentially four types of executives:

1. Those that can start businesses,
2. Those that can grow businesses,
3. Those that can drive a profit out of businesses (ie. reduce expenses and improve profitability)
4. And those that can shut down, sell, or turn around businesses.

After studying executive performance in their company for several decades, they concluded that senior leaders are best wired for only one of these roles, not all four. So rather than try to train a single executive to handle all four situations, they found it was far more valuable to move "startup CEOs" to new startups, and "growth CEOs" to new growth businesses. This research supports the point that there will be times when new leadership is needed.

Second, recognize that founders are a special breed.

Founders are unusually unique people. They have the passion, energy, and vision to often challenge the status quo, push new ideas and business models, invent new products and services, and fight entrenched thinking. They can be brash, self-confident, and sometimes rude. While some can transition to institutional leaders who grow their companies for years (e.g. Larry Ellison, Mark Zuckerberg), this is more the exception than the rule. Most are coached to bring in more seasoned leaders (e.g. Sheryl Sandberg at Facebook,), and they often stay on as CEO/innovators or sometimes leave to start new companies.

This is not to excuse sexual harassment, discrimination, or any other illegal or unethical practices. It's just important to remember that disruptive founders often push the limits, and sometimes that's why they are replaced.

Third, Uber's identity and global market position has changed. It has become a business and social icon.... faster than it may have realized.

Uber is in a particularly unique situation. The company has become an icon for many changes in society. Its disruptive business model, creative technology, willingness to challenge institutions (e.g the taxi industry), and focus on data-driven business has pioneered many new ways of doing business. Think about the innovations:

• Uber popularized the idea of car sharing, something we now see in many similar companies. (Companies like Turo and Getaround even let you rent out your own car and make money on the side.)
• Uber iconified the idea of gig-work, opening up the door to new ways of working, challenging the definition of an employee, and making it possible for people without traditional pedigrees to quickly find work. (A recent article in the NY Times describes how Uber is disrupting the incumbent London taxi service.)
• Uber greatly extended the application of easy to use digital and location-based services, enabling us to find a car in seconds, watch the car come to meet us, and immediately see how long it would take to get where we are going. (Many delivery services now use this technique.)
• Uber created one of the biggest markets for credentialized ratings - ratings of both service provider and customer. (Amazon does not rate us as customers, to my knowledge). We now consider this practice commonplace, but it was only a few years ago none of these techniques were even used.

In fact Uber has been so effective, its name is often used to identify new businesses in other markets.

The name Uber has become a proper noun.

We use the word “The Uber of ABC” and “Uberized” as generic terms, similar to the way we use the word “Google” to mean search, “Coke” to mean soda, and “Kleenex” to mean tissues.

Historically, companies that have this type of impact seemed to break the rules. (IBM, for example, which essentially defined the IT industry in the 1960s and 1970s, endured a 40 year consent decree that lasted from 1956 to 1996, forcing the company to unbundle some of its products and services.)

Remember, Uber is a young company: it's only 8 years old. As it rapidly grew (in both size and influence), the board and management team may not have fully understood how iconic it had become. Today Uber has become a company that demonstrates the future of work, delivers on the future of mobility, and impacts the future of urban life. And as such a social institution, Uber is now burdened with higher expectations, increased public scrutiny, and the need for ethics, values, and leadership like never before.

For many of us, Uber has served as an example, a business model innovator, and a representation of the new social contract we have with work. We may know people who work for Uber, we talk with Uber drivers and ask them about their lives, and in urban areas the service has changed the way we live. In my case, living in the crowded San Francisco Bay Area, I could never really get around like I do without Uber (or a similar service).

While you may think this latter shift is subtle, I believe it is both profound and important. Today Uber should try to act, behave, and set an example like a leader – redefining itself as an institution we can trust, honor and respect. Other disruptive companies like Tesla, Airbnb, and Facebook are taking on similar leadership positions, defining their business in the context of a broader social value.

Tesla’s CEO takes time to educate the world on the need for new sources of energy. Airbnb’s leadership team focuses on being a contributing member of the community, paying taxes, and supporting to the local economy. Facebook is investing in tools and programs designed to help rid us of fake news, terrorist communications, and misleading content.

Uber should consider Citizenship a core part of its strategy going forward.

These activities represent what I call “citizenship” – thinking about the business in the context of the collective good. As I describe in the article Citizenship On The Rise, people today are more focused on corporate and individual citizenship than in many years, and the impression of a company's citizenship can dramatically affect customer and public policy behavior.

(For example, Research by Second Measure believe that Lyft's market share jumped from 12.4% to 21.7% in the last 18 months and researcher Superfly thinks it is now as as high as 30% in many markets today.)

Remember that disruptive companies like Uber often put other companies out of business - so there is always a question of whether they are "good" for society or not. So in this case I think Uber should look at its investments, programs, and culture to make sure the company is focused on "doing good" not just "doing well."

Of course allegations of sexual misconduct, poor diversity practices, and teenage-style behavior are unacceptable in any business. So none of us can excuse these kinds of practices.

But this kind of behavior does go on in many organizations, and it often takes a crisis for the leadership team to rethink its strategy and understand that such behavior is neither healthy, ethical, or good for long term growth.

Civility and Fairness Matter

An important leadership lessons I've learned over the years is the need for civility. Christine Porath, a professor at Georgetown, has studied civility at work and finds that it is getting worse over the years (the most frequent excuse for being rude or unfair is that we "didn't have time to be nice"). Her research points out that when we are polite and respectful to others, performance and innovation goes up. So there may be lessons for Uber to be learned here.

In my personal experience over 35+ years in business, I have seen bad behavior, lapses in ethics (channel stuffing, accounting irregularities), and selfish management many times over. It’s never nice to watch, and it always makes you question human nature. While in many ways it's inexcusable, it can often be attributed to youth, inexperience, and stress. And that’s why we have boards and governance, to watch over and advise leaders when they act out of line.

My point is not that we should excuse any of the problems we see at Uber, but rather think about them as an opportunity for Uber to reinvent itself. If the board can consider Uber's bigger role in society, it has an opportunity to rebuild the management team in a positive way, reinforce the need for citizenship and change Uber into a positive force for good.

Let’s see what happens next.

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About the Author: Josh Bersin is the founder and Principal of Bersin by Deloitte, Deloitte Consulting LLP, a leading research and advisory firm focused on corporate leadership, talent, learning, and the intersection between work and life.

Josh is a published author on Forbes, a LinkedIn Influencer, and has appeared on Bloomberg, NPR, and the Wall Street Journal, and speaks at industry conferences and to corporate HR departments around the world.

You can contact Josh on twitter at@josh_bersin and follow him athttps://www.dhirubhai.net/in/bersin . Josh's personal blog is at www.joshbersin.com .